Legislature(1997 - 1998)
05/05/1997 02:00 AM House FIN
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* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
HOUSE FINANCE COMMITTEE
May 5, 1997
2:00 P.M.
TAPE HFC 97-121, Side 1, #000 - end.
TAPE HFC 97-121, Side 2, #000 - end.
TAPE HFC 97-122, Side 1, #000 - end.
TAPE HFC 97-122, Side 2, #000 - end.
TAPE HFC 97-123, Side 1, #000 - #973.
CALL TO ORDER
Co-Chair Therriault called the House Finance Committee meeting to
order at 2:00 p.m.
PRESENT
Co-Chair Hanley Representative Kelly
Co-Chair Therriault Representative Kohring
Representative Davies Representative Martin
Representative Davis Representative Moses
Representative Foster Representative Mulder
Representative Grussendorf
ALSO PRESENT
Senator Dave Donley; George Utermohle, Legislative Legal Counsel;
Annalee McConnell, Director, Office of Management and Budget,
Office of the Governor; Alison Elgee, Deputy Commissioner,
Department of Administration; Catherine Reardon, Director,
Occupational Licensing, Department of Commerce and Economic
Development; Geron Bruce, Legislative Liaison, Department of Fish
and Game; Karen Brand, Staff, Senator Donley; Craig Johnson,
Staff, Senator Ward; Joe McKinnon, Anchorage; Mitchell Gravo,
Alaska State Homebuilders Association; John Grummet, Alaska
Insurance Agents; Mike McMullen, Director, Division of Personnel,
Department of Administration; Marianne Burke, Director, Division of
Insurance, Department of Commerce and Economic Development; Alan
Wilson, Alaska State Homebuilders Association; Paul Grossi,
Director, Division of Workers' Compensation, Department of Labor;
Richard Block, Seward.
SUMMARY
HB 116 "An Act relating to workers' compensation
self-insurance."
CSHB 116 (FIN) was reported out of Committee with "no
recommendation" and with a fiscal impact note by the
Department of Commerce and Economic Development; and with
a fiscal impact note by the Department of Labor, both
dated 4/25/97.
SB 7 "An Act reducing certain resident sport fishing, hunting,
and trapping license fees, increasing certain nonresident
sport fishing license and tag fees, and relating to
nonresident sport fishing, hunting, and trapping
licenses; and providing for an effective date."
HCS CSSB 7 (FIN) was reported out of Committee with "no
recommendation" and with two fiscal impact notes by the
Department of Fish and Game, and with a zero fiscal note
by the Department of Public Safety, dated 2/11/97.
SB 55 "An Act relating to the definition of certain state
receipts; and providing for an effective date."
HCS CSSB 55 (FIN) was reported out of Committee with "no
recommendation" and with a fiscal impact note by the
Office of the Governor, DATED 4/18/97.
SB 68 "An Act relating to the Task Force on Privatization; and
providing for an effective date."
HCS CSSB 68 (STA) was reported out of Committee with a
"do pass" recommendation and with a fiscal impact note by
the Legislative Affairs Agency; and with two fiscal
impact notes by the Office of the Governor, all dated
3/26/97.
SB 103 "An Act relating to hearings before and authorizing fees
for the State Commission for Human Rights; and providing
for an effective date."
HCS CSSB 103 (FIN) was reported out of Committee with a
"do pass" recommendation and with a fiscal impact note by
the Office of the Governor, dated 4/29/97.
SENATE BILL NO. 103
"An Act relating to hearings before and authorizing fees for
the State Commission for Human Rights; and providing for an
effective date."
Representative Mulder MOVED to Rescind the Committee's action in
passing HCS CSSB 103 (STA) from Committee. There being NO
OBJECTION, it was so ordered.
Representative Mulder MOVED to adopt work draft #O-GS0045\B, dated
5/1/97. There being NO OBJECTION, it was so ordered.
Representative Mulder MOVED to report HCS CSSB 103 (FIN) out of
Committee with individual recommendations and the accompanying
fiscal note. There being NO OBJECTION, it was so ordered.
Co-Chair Therriault explained that the work draft is identical to
CSHB 155 (FIN).
HCS CSSB 103 (FIN) was reported out of Committee with a "do pass"
recommendation and a fiscal impact note by the Office of the
Governor, dated 4/29/97.
SENATE BILL NO. 55
"An Act relating to the definition of certain state receipts;
and providing for an effective date."
ANNALEE MCCONNELL, DIRECTOR, OFFICE OF MANAGEMENT AND BUDGET,
OFFICE OF THE GOVERNOR noted that SB 55 establishes designated
program receipts as a fund source. She discussed the Office of the
Governor's fiscal note. Designated program receipt revenues would
increase by $2.6 million dollars from FY 97 to FY 98, without being
counted against other areas of the budget.
Ms. McConnell noted that the Legislative Auditor recommended that
state employee travel paid by a third party be brought on budget.
She suggested that these revenues be included under the definition
of designated program receipts. She noted that areas in the
Division of Occupational Licensing may be open for consideration.
Ms. McConnell observed that much of SB 55 has already been passed
as SB 136. She recommended that section 5 be deleted. She
stressed that the Governor has the authority to put to competitive
bid, grants authorized by the Legislature. She stressed that the
Administration has worked to issue competitive grants instead of
designated grants. She requested a deadline, for review by the
legislature, of supplemental legislation. She asserted that this
would allow the bulk of the supplemental to be done in a more
expeditious fashion.
Co-Chair Therriault noted that SB 136 did not include sections 4
and 5 of SB 55. Section 13 of SB 55 provides for an effective
date. The language in section 4 was deleted by the House Finance
Committee in HCS CSSB 136 (FIN). He observed that the title
reflects the inclusion of section 4.
Representative Martin recounted that the Attorney General's Office
indicated that the other body can remove language from the bill
that is proposed in the title. He stressed that the title is not
included in law. He acknowledged that language cannot be added to
the legislation that is not reflected in the title. He observed
that stripper well funding is one-hundred percent federal.
Ms. McConnell stated that she would have to review federal
regulations to determine if grants containing federal funding must
be competively bid.
Representative Martin noted that the Governor vetoed a grant issued
through the Department of Community and Regional Affairs. The
funding was transferred to the Alaska Housing Finance Corporation
(AHFC).
Co-Chair Therriault provided members with a memorandum from George
Utermohle, Legislative Counsel, relating to the effect of having an
over inclusive bill title (copy on file). He noted that Mr.
Utermohle indicated that the more specific the description of the
"missing" item is in the title, the more likely that a court will
find the title misleading and unconstitutional.
JOE MCKINNON, ALASKA HOUSING FINANCE CORPORATION testified via the
teleconference network. In response to a question by
Representative Martin, Mr. McKinnon explained that there are
restrictions on oil overcharge funds. The settlement requires a
spending plan for expenditure of Exxon Valdez Oil Spill Settlement
funds. The plan is referred to as the Stripper Well Plan. The
Alaska Housing Finance Corporation has submitted a plan covering FY
97 - FY 99. This plan has received approval. The Legislature
appropriated designated grants utilizing this funding source in FY
97. He observed that AHFC developed its own scope of services for
these grants. Both grantees objected, but ultimately signed grant
agreements, agreeing to perform the work. He stated the scope of
the grant, what is to be done under it, and if it falls under the
Stripper Well Plan is at issue. Another issue is the agency to
which the grants can be appropriated. The FY 97 grants were
appropriated to the Department of Community and Regional Affairs,
but AHFC is the designated agency that submits the Stripper Well
Plan. He observed that there is a question as to whether or not
the grant can be designated to a specific recipient. He noted that
federal regulations require competitive solicitations for the
expenditure of funding from the Department of Energy. Since
stripper well funds were used as a funding source for these
designated grants, there are a number of legal problems.
Representative Davis MOVED to adopt Amendment 1 (copy on file).
Co-Chair Therriault OBJECTED.
ALISON ELGEE, DEPUTY COMMISSIONER, DEPARTMENT OF ADMINISTRATION
explained that under Amendment 1 user fees paid by pioneer home
residents would be accounted for separately, and appropriations
from the receipts would not be made from the unrestricted general
fund. Two years ago the Pioneer Homes Advisory Board adopted a
recommendation to move the rate schedule to full cost of care over
a period of seven years. She clarified that the decision was made
to resolve an equity issue between the nursing home industry and
the pioneer homes. Long term care beds are split 50/50 between
nursing home and pioneer home beds. Legislation was also under
consideration to privatize homes. The Advisory Board felt that, if
residents of the homes were asked to pay what they could afford
toward the full cost of care, the privatization pressure would be
alleviated. Currently, these revenues are designated as general
fund program receipts. Increased user fees have not been reflected
as increased general fund support of the program. In FY 98, the
Administration is proposing an additional $1.9 million dollars in
revenues from pioneer home residents. These have been used in the
budget to supplant the general fund appropriation. In FY 97, $7.8
million dollars in user fees were budgeted. The Department of
Administration expects to collect $7.5 million dollars in user
fees, in FY 97. The Department of Administration has budgeted $9.9
million dollars in user fees for FY 98. This includes the FY 97
shortfall.
Co-Chair Therriault questioned if the pioneer program is 100
percent self funding. He spoke against Amendment 1.
Representative Davis WITHDREW Amendment 1.
Representative Grussendorf stressed that pioneer residents expect
the increase in rates to be reflected in the budget. He MOVED to
adopt Amendment 1. Co-Chair Therriault OBJECTED.
Representative Davies stated that designated program receipts
should cover items where there is a strong expectation on the part
of those paying user fees that the fee is being collected for the
operation of the activity in which they are participating.
Representative Martin observed that approximately $980 million
dollars in program receipts were previously identified as general
fund dollars. He stressed that program receipts help legislators
to identify how much money different departments or programs
generate. He disagreed with allowing departments or programs to
keep 100 percent of what they generate. He observed that some
programs generate more money than they expend.
Co-Chair Therriault pointed out that the subcommittee chairs
consider the contribution of program receipts.
A roll call vote was taken on the MOTION to adopt Amendment 1.
IN FAVOR: Grussendorf, Moses, Davies
OPPOSED: Foster, Kelly, Martin, Mulder, Davis, Therriault
Co-Chair Hanley and Representative Kohring were absent from the
meeting.
The MOTION FAILED (3-6).
Co-Chair Therriault MOVED to adopt Amendment 2 (copy on file). He
explained that Amendment 2 would allow the department to withhold
a grant if it is not in the public interest. The Administration
could hold on to the money until an agreement is reached by the
grantee.
Representative Grussendorf theorized that a situation could arise
where the service is needed but the Administration feels that the
grantee is unable to provide the service. He questioned what would
happen in the interim.
Co-Chair Therriault pointed out that the Administration admitted
that this section of the statute is not used very often. He
clarified that the Legislative Budget and Audit Committee would not
be able to award grants to other recipients. He emphasized that
Amendment 2 meets the title requirements.
Representative Davies noted that the Legislature appropriated a
grant to a grantee that the Administration felt was inappropriate.
The Administration put the grant out to competitive bid. He
expressed support for the Administration's actions. He spoke
against removing the Administration's ability to deny a designated
grantee and award the grant through competitive bid.
Representative Martin suggested the addition of "or if in conflict
with federal regulations and or laws." He stressed that the State
intends to obey federal regulations and laws, in accordance with
the receipt of federal funds. He observed that a grantee may be
incarcerated. He questioned if an incarcerated grantee should
receive a grant.
Co-Chair Therriault pointed out that an individual may not be the
entity providing the service. Representative Martin stressed that
a problem can occur if the individual is the sole owner.
Representative Mulder emphasized that there is an issue of "turf
war" between the Legislature and Administration. He stressed that
legislator's ability to name a grant recipient is at issue. He
asserted that the proposed amendment makes an allowance for the
Administration to cancel the grant if it is not in the State's best
interest.
Representative Davies pointed out that it would be against the
public interest to issue a grant to a grantee who is in jail.
Representative Martin MOVED to amend Amendment 2, add "in conflict
with federal regulations and or laws." Representative Davis spoke
against the amendment to Amendment 2. He did not think the
amendment to Amendment 2 was necessary.
Representative J. Davies argued in support of the amendment to
Amendment 2.
Representative Grussendorf pointed out that the State's interest
sometimes conflicts with federal law.
Representative Martin spoke in support of the Administration's
action.
A roll call vote was taken on the MOTION to adopt the amendment to
Amendment 2.
IN FAVOR: Grussendorf, Kohring, Martin, Davies
OPPOSED: Mulder, Davis, Foster, Therriault
Co-Chair Hanley and Representatives Kelly, and Moses were absent
for the vote.
The MOTION FAILED (4-4).
Representative Grussendorf did not think the amendment went far
enough.
Representative Davies expressed concern that the amendment does not
allow a program to be continued if the Administration does not
think it is in the State's best interest to issue the grant to the
grantee. He estimated that litigation will occur over the
separation of powers.
(Tape Change, HFC 97-121, Side 2)
Representative Davies questioned if the legislation fits under the
single subject rule. He did not think the title should prevent the
removal of section 5. He noted that titles are not enacted in law.
He observed that there is a general severability statute in law.
Representative Martin maintained that the amendment would have a
"Christmas tree effect". He asserted that there will be a lot of
presents under the tree. He maintained that the legislation will
open the door to designated grants.
A roll call vote was taken on the MOTION to adopt Amendment 2.
IN FAVOR: Kelly, Mulder, Davis, Foster, Therriault
OPPOSED: Kohring, Martin, Davies, Grussendorf
Co-Chair Hanley and Representative Moses were absent for the vote.
The MOTION PASSED (5-4).
Representative Davies MOVED to adopt Amendment 6. Amendment 6
would delete section 5. Section 5 was amended by Amendment 2.
Representative Davies noted that similar language was removed by
the House Finance Committee from SB 136. The amendment would leave
the statute unchanged.
Co-Chair Therriault referred to a memorandum by legislative legal
counsel which indicated that Article II, Section 13 requires that
the subject of each bill shall be expressed in the title. (See
memorandum from George Utermohle to Co-Chair Therriault dated May
2, 1997, copy on file.) He noted that the title includes this
section of the bill. The memorandum stated that "the more specific
the description of the missing items is in the title, the more
likely that a court will find the title misleading and
unconstitutional.
Representative Davies argued that everything that is in the bill is
in the title. He observed that the title would have an extra item.
Co-Chair Therriault concluded that, according to Representative
Davies' argument, all titles should say, "the following bill
contains some or all of the mentioned items."
Representative Davies maintained that the second House should have
the ability to remove a section of the bill without violating the
title.
Representative Grussendorf stressed that titles indicate to the
other body what is available for discussion. He argued that action
does not have to be taken on everything in the title. He
acknowledged that nothing can be added. He maintained that the
title represents the parameters for the process. He asserted that
every item in the title does not have to be addressed.
Representative Martin asked for an opinion by the Department of
Law. He spoke in support of the amendment.
Co-Chair Therriault emphasized that if the title is broad items can
be added or subtracted from the general subject area.
Representative Davies noted that anything can fit under a broad
title. Narrow titles do not allow anything to be added beyond what
is in the title. He maintained that there is an attempt by one
body to prevent the other body from taking appropriate action in
committee.
A roll call vote was taken on the MOTION to adopt Amendment 6.
IN FAVOR: Kohring, Martin, Davies, Grussendorf
OPPOSED: Mulder, Davis, Foster, Kelly, Therriault
Co-Chair Hanley and Representative Moses were absent from the vote.
The MOTION FAILED (4-5).
Co-Chair Therriault provided members with Amendment 7 (copy on
file). He observed that action taken in the budget requires the
amendment.
GEORGE UTERMOHLE, LEGISLATIVE COUNSEL, LEGISLATIVE AFFAIRS AGENCY
explained that Amendment 7 would add a new provision for a grant
program. He observed that SB 107 contains an appropriation to the
Department of Community and Regional Affairs for grants to
unincorporated rural communities affected by the Exxon Valdez oil
spill. There is no grant authority in the Department of Community
and Regional Affairs for these grants. The amendment would allow
these grants to be made. A similar appropriation was made in 1993
under AS 44.47.050. This statute does not provide the Department
of Community and Regional Affairs with any authority to make
grants. The amendment would make the grant authority retroactive
to 1993.
In response to a question by Representative Martin, Mr. Utermohle
clarified that the funding source is derived from the settlement of
litigation arising from the Exxon Valdez oil spill. These funds
are limited to oil spill affect areas.
Representative Martin questioned how the amendment fits under the
title. Mr. Utermohle stated that the amendment fits under the
provision relating to the state budget in a broad sense.
Mr. Utermohle noted that the Department of Community and Regional
Affairs can make grants to incorporated areas through the municipal
grant authority in AS 37.05.315.
In response to a question by Representative Davies, Mr. Utermohle
stated that section 5 would fit under broad state budget
provisions. He stressed that section 5 is specifically provided
for in the title. He stated that the deletion of section 5 would
necessitate the removal of that portion of the title.
Co-Chair Therriault MOVED to adopt Amendment 7. A roll call vote
was taken on the MOTION.
IN FAVOR: Moses, Davis, Grussendorf, Foster, Kelly, Therriault
OPPOSED: Martin, Davies, Kohring
Co-Chair Hanley and Representative Mulder were absent for the vote.
The MOTION PASSED (6-3).
Representative Davies MOVED to adopt Amendment 5 (copy on file).
He explained that Amendment 5 would add two categories under
designated receipts. Receipts from the Division of Occupational
Licensing and the Division of Insurance, except for premium tax
receipts, would be added. He observed that statute specifies that
users pay the entire cost of the operation of these Divisions. The
fees paid are adjusted based on the cost of providing the service.
He argued that these are "clearly" designated receipts.
CATHERINE REARDON, DIRECTOR, DIVISION OF OCCUPATIONAL LICENSING,
DEPARTMENT OF COMMERCE AND ECONOMIC DEVELOPMENT spoke in support of
the amendment. She noted that fees are raised or lowered so that
they break even for each occupation.
A roll call vote was taken on the MOTION to adopt Amendment 5.
IN FAVOR: Davies, Grussendorf, Moses
OPPOSED: Davis, Foster, Kelly, Kohring, Martin, Mulder, Therriault
Co-Chair Hanley was absent for the vote.
The MOTION FAILED (3-7).
Representative Davies MOVED to adopt Amendment 4 (copy on file).
Co-Chair Therriault OBJECTED. Amendment 4 would identify state
park system user fees as designated program receipts.
Representative Davies maintained that users of the state park
system expect that their fees will be used for park maintenance.
Co-Chair Therriault did not think that current park receipts are
being used for items outside of the park system. Representative
Davies pointed out that as park fees increase the general fund
contribution is being reduced. He asserted that the public expects
increased fees to be used for additional maintenance.
A roll call vote was taken on the MOTION to adopt Amendment 4.
IN FAVOR: Davies, Grussendorf, Moses
OPPOSED: Davis, Foster, Kelly, Kohring, Martin, Mulder, Therriault
Co-Chair Hanley was absent for the vote.
The MOTION FAILED (3-7).
Representative Davies provided members with Amendment 3 (copy on
file). Representative Mulder OBJECTED. Representative Davies
explained that Amendment 3 would require the Legislative Council to
administer grants. He argued that if the Administration is not
allowed discretion to determine if grants are appropriate then
responsibility should be transferred to the Legislature.
Co-Chair Therriault pointed out that, with the adoption of
Amendment 2, the Administration can hold a grant and negotiate with
the grantee.
Representative Davies WITHDREW Amendment 3.
Representative Martin expressed concern that separation of powers
are not maintained. He cautioned that it is difficult to track a
large number of designated grants. He maintained that designated
grants allow corruption.
Representative Mulder MOVED to report HCS CSSB 55 (FIN) out of
Committee with individual recommendations and with the accompanying
fiscal note. Representatives Martin and Davies OBJECTED.
Representative Martin spoke against the legislation.
Representative Davies noted that he could not support the
legislation with the inclusion of section 5.
Representative Grussendorf questioned the interpretation by
legislative legal counsel regarding the title. He suggested that
other legal opinions be sought. Co-Chair Therriault responded that
he would be seek further legal opinions. Representative Kelly
echoed the comments of Representative Grussendorf.
A roll call vote was taken on the MOTION to move SB 55 from
Committee.
IN FAVOR: Grussendorf, Davis, Foster, Kelly, Kohring, Martin,
Mulder, Therriault
OPPOSED: Martin, Davies
Co-Chair Hanley was absent for the vote.
The MOTION PASSED (8-2).
HCS CSSB 55 (FIN) was reported out of Committee with "no
recommendation" and with a fiscal impact note by the Office of the
Governor, DATED 4/18/97.
(Tape Change, HFC 97-122, Side 1)
SENATE BILL NO. 68
"An Act relating to the Task Force on Privatization; and
providing for an effective date."
CRAIG JOHNSON, STAFF, SENATOR WARD testified in support of SB 68.
He explained that the legislation would establish a task force to
identify functions of state government that can be transferred to
the private sector. The task fore would be made up of members of
the public and the legislative and executive branches. He stated
that the task force would look at every department, starting with
the Department of Corrections, the Department of Health & Social
Services, the Department of Transportation and Public Facilities
and contracting. The legislation is endorsed by the Alaska
Trucking Association, Gold Belt Inc., the National Federal of
Independent Businesses, Alaska Nursing Home Association and Local
71. He noted that 48 other states, including Alaska, have some
type of privatization. He stressed that SB 68 would be the first
attempt to do a broad look at privatization in a non-political
aspect. He maintained that it is not the intention of the bill to
"recreate the wheel." The legislation was based on privatization
studies of other states. The task force would divide state
government into two equal parts to study over two years. The task
force would be made up of members of both Houses, the private
sector and appointees from the Governor. There would be thirteen
members. Minority and majority members would be included.
Representative Davies provided members with Amendment 1 (copy on
file). He explained that Amendment 1 would redistribute the
membership. He stressed that different viewpoints should be
represented. The amendment would allow the task force to select
the chair and vice-chair from among the members. Amendment 1 would
allow the Governor to have an additional appointee. The Senate
President and Speaker of the House would each appoint one member
instead of two. The amendment would also add the commissioner of
the Department of Commerce and Economic Development or the
commissioner's appointee.
Mr. Johnson noted the Governor's reluctance to appoint members to
the task force based on concerns regarding the separation of
powers. He observed that a legal opinion indicates that the
separation of powers doctrine would not be violated by allowing the
Governor to make appointments to the task force. He spoke against
an additional appointee by the Governor. He asserted that the task
force was designed to be fair.
Representative Davies MOVED to adopt 1. Co-Chair Therriault
OBJECTED.
A roll call vote was taken on the MOTION to adopt Amendment 1.
IN FAVOR: Davies
OPPOSED: Kelly, Kohring, Martin, Mulder, Therriault
Co-Chair Hanley and Representatives Davis, Moses, Foster, and
Grussendorf were absent for the vote.
The MOTION FAILED (1-5).
Representative Martin MOVED to report HCS CSSB 68 (STA) out of
Committee with individual recommendations and with the accompanying
fiscal notes. There being NO OBJECTION, it was so ordered.
SENATE BILL NO. 7
"An Act reducing certain resident sport fishing, hunting,
and trapping license fees, increasing certain nonresident
sport fishing license and tag fees, and relating to
nonresident sport fishing, hunting, and trapping
licenses; and providing for an effective date."
KAREN BRAND, STAFF, SENATOR DONLEY testified in support of SB 7.
She explained that the legislation makes changes to sport fish
license fees. Three day non-resident sport fish license fees would
be increased from $15 to $20 dollars. A new seven day non-resident
king salmon license would be $30 dollars. A fourteen day license
would be increased from $35 to $50 dollars. Non-resident annual
sport fish licenses would be increased from $50 dollars to $150
hundred dollars. Resident combination hunting and sport fishing
fees would be reduced by $1 dollars each.
SENATOR DAVE DONLEY clarified that the $1 dollar reduction is a
response to the issuance of two licenses in one. He emphasized
that the legislation addresses the problem of non-residents
utilizing year long sport fish licenses to commercially harvest
sport caught fish. He observed that the Board of Fisheries did not
address the issue. He reiterated that the legislation reduces fees
for combination licenses. He added that section 7 is a technical
amendment.
Representative Mulder provided members with Amendment 1 (copy on
file).
GERON BRUCE, LEGISLATIVE LIAISON, DEPARTMENT OF FISH AND GAME
clarified that there have been a number of instances of non-
residents selling fish harvested under a non-resident license. He
indicated that the problem is not wide spread.
Representative Mulder MOVED to adopt Amendment 1. Co-Chair
Therriault OBJECTED for purposes of discussion. The amendment
would lower the annual non-resident sport fishing license to $75
dollars. He noted that Wyoming charges the highest fee at $72
dollars. A 14 day king salmon tag would be $40 dollars. An annual
king salmon tag would be $50 dollars.
Representative Davies MOVED to amend Amendment 1, a 14 day salmon
license would be 50 dollars, and an annual king salmon tag would go
to $75 dollars.
Representative Mulder noted that the annual king salmon license
would cost the same as an annual sport fishing licenses.
In response to a question by Representative Martin, Mr. Bruce did
not anticipate that the fee structure would reduce non-resident
sport fishing.
Co-Chair Therriault clarified that the effective date is January 1,
1998.
Senator Donley observed that the Department of Fish and Game
recommended that the annual fee be $125 hundred dollars. He
suggested the annual fee by changed to $100 hundred dollars. He
emphasized that king salmon fishing is unique. He stressed that
these licenses are issued for a year.
Representative Davies WITHDREW his amendment to Amendment 1. He
MOVED to amend Amendment 1, a 14 day salmon license would be 50
dollars, an annual sport fishing tag would go to $100 dollars, and
an annual king salmon tag would go to $100 dollars. There being NO
OBJECTION, it was so ordered.
There being NO OBJECTION, Amendment 1 was adopted as amended.
Representative Mulder spoke in support of SB 7. He maintained that
the legislation will help sport fisheries. He MOVED to report HCS
CSSB 7 (FIN) out of Committee with individual recommendations and
with the accompanying fiscal notes.
HCS CSSB 7 (FIN) was reported out of Committee with "no
recommendation" and with two fiscal impact notes by the Department
of Fish and Game, and with a zero fiscal note by the Department of
Public Safety, dated 2/11/97.
HOUSE BILL NO. 116
"An Act relating to workers' compensation self-insurance."
GEORGE DOZIER, STAFF, REPRESENTATIVE KOTT testified in support of
HB 116. He explained that HB 116 permits the formation of a
worker's compensation self employment group. The group is defined
as an association of 10 or more employers who are in the same or
similar business and are members of the same trade association,
providing that the association has been in existence for at least
5 years. The legislation requires the establishment of a board of
directors to set policy and permits the employment of a
professional administrator and service companies. In addition, the
legislation contains several requirements that must be satisfied
before a certificate of approval is issued by the director of the
Division of Insurance. The net worth of the group must be at least
one million dollars. The group must have security posted in the
amount of $450 thousand dollars. The association must have excess
insurance by an approved company. There must be joint and
severable liability indemnity agreements signed by each person or
company participating in the group. Fidelity bonds and errors and
omissions insurance are also required. The legislation allows the
director of the Division of Insurance to examine finances, books
and records of the group. The cost of review by the Division would
be born by the group. Annual audits and statements would be
submitted to the Division of Insurance. The group would be
required to make contributions to the Alaska Second Injury Fund.
Refunds of previous years surpluses are allowed if approved by the
director of the Division of Insurance.
Representative Mulder referred to section 2 on page 13. Mr. Dozier
clarified that this section should have been deleted.
JOHN GRUMMET, ALASKA STATE INSURANCE AGENTS ASSOCIATION testified
against the legislation. He maintained that the legislation is
designed to lower workers' compensation costs for the Home Builders
Association. He stated that the legislation does not require pools
to participate in the current assigned risk pool. Fair claims
settlement practices would not be addressed. He discussed the
Guarantee Fund. He noted that it is not clear if all groups would
participate in the same fund. He stressed that administrative
costs are not addressed. There are no licensing requirements. He
asserted that self insured associations would not be subject to the
same financial requirements as other agents. He noted that errors
and omissions insurance does not cover insolvency of companies. If
there is a bad loss experience in the pool they have the ability to
request extra funds to cover costs. He stressed that asset
requirements are not the same as those for insurance companies. He
asserted that unfair competition is being created. He noted that
there are 5 to 6 companies writing workers' compensation insurance.
He observed that rates are down due to competition. He maintained
that there would not be an advantage for 5 to 7 years. He asserted
that the group would not be subject to the same regulations. He
expressed concern that the regulatory body will not have the
ability to monitor the strength of these companies. He stressed
that premium options will be reduced due to an unfair playing
field, resulting in increased costs. He stated that workers'
compensation rates have been reduced by 40 percent since 1988.
In response to a question by Representative Martin, Mr. Grummet
explained that money must be available to pay claims. He stated
that companies make money on investment income. The more
investment income the better the ability to pay claims. He
observed that high risk groups can go as a group to obtain lower
rates from established companies. He stated that if there are more
claims than premium dollars, rates will be raised. He noted that
everyone is eligible for workers' compensation coverage in Alaska.
(Tape Change, HFC 97-122, Side 2)
In response to a question by Representative Davies, Mr. Grummet
stated that agents should participate in the assigned risk pool so
that the same thing can be offered to everyone. He maintained that
if they do not participate they are not contributing to the overall
benefit of the market place. He stressed that the bad should
accompany the good.
Representative Kohring noted that workers' compensation rates are
high. Mr. Grummet stated that the workers' compensation rate for
coverage of dry wall workers is $9.87 dollars per hundred dollars
in pay roll. Carpentry coverage has been reduced from $17 to $12
dollars per hundred dollars of payroll. He pointed out that the
legislation originated several years ago when the rates were
higher. Rates are based on a national average.
Representative Kelly asked what is reducing the rates. Mr. Grummet
responded that better loss control and precautions have contributed
to reduced rates. There has been better promotion of safe work
places.
Representative Davies noted that one of the reasons the legislation
was introduced was to create a strong motivation for self education
and safety. Mr. Grummet maintained that there will be claims in
the construction industry. He stressed that there will not be
enough reserves to prevent insolvency with the pool. He asked what
will happen to the consumer when they cannot pay their bills
because they are not on the job.
RICHARD BLOCK, ALASKA NATIONAL INSURANCE COMPANY, SEWARD testified
via the teleconference network in opposition to HB 116. He
stressed that their primary objections have not be addressed. He
noted that the primary concern is that the legislation allows the
creation of insurance companies without requiring any liquid
capital to fund operations. He observed that there are early
operational expenses that cannot be offset by receipts of sale
revenues. Money is needed to support operations until business has
developed. He emphasized that the cost of goods or losses is
unknown. He noted that the insurance code requires a capital base
to operate. These capital and surplus requirements have been
periodically raised by the legislature. He acknowledged that the
net worth of the participates must be $1 million dollars. He
suggested that this proposes that customers will pay an additional
amount to cover their loss. He observed that there is no provision
for determining net worth. He stressed that 50 participants worth
$20 thousand dollars could fulfil the requirement. He did not
think this is an appropriate way to provide financial underpinning
for policy holders and claimants. He stated that it is not clear
how the bond would be available to pay claims. He pointed out that
the code allows reciprocals to provide cost control. Associations
can be grouped for purposes of loss control activities, premiums,
and dividends. He maintained trade group concerns can be resolved
through current law. He spoke against the legislation.
Representative Martin asked how workers are protected during the
transition period. Mr. Block stated that workers would be at
serious risk if the group collects insufficient amount of premiums
to cover losses. He noted that losses would be paid from the bond,
guarantee association, and assessment. He emphasized that the
individual worker would not receive compensation while the Division
attempts to collect the money. He stressed that a single
catastrophic loss could occur.
Representative Martin questioned if the State is responsible while
the new group establishes itself financially. Mr. Block did not
think the State was responsible for guaranteeing proper workers'
compensation coverage.
MARIANNE BURKE, DIRECTOR, DIVISION OF INSURANCE expressed concerns
with the legislation. She stated that there would be inadequate
cash to pay the claims that will be incurred. The legislation
requires no money in the group. She acknowledged that the
legislation requires that the group have a $1 million dollar net
worth. The legislation requires the director to issue a
certificate of approval if certain provisions are met. She noted
that 25 percent of the first year's premium, which must be at least
$500 thousand dollars, must be collected. Of this amount, 75
percent or approximately $88 thousand dollars is available to pay
claims. The group must also have a bond of $450 thousand dollars.
This money is only available when claims cannot be paid. She
maintained that the money will not be available until the
association is insolvent. The bond would not be available if the
group only over-drafted. The legislation also provides for
specific and aggregate excess insurance. She noted that the cost
of excess insurance depends on the trigger point for coverage. The
cost of excess insurance would be in addition to what the employer
is paying. She noted that 25 percent of the first year's premium
would be deposited into a reserve account. This reserve can be
used after the premium has been spent. She observed that there is
a conflict in statute. Statute requires that the fund be
maintained. She stressed that insurance companies must collect
enough money to pay losses. Their profit is on the invested
assets. This group does not have excess money up front. They will
be relying on premiums to pay claims, administrative costs, excess
insurance, and safety programs.
Ms. Burke observed that the Alaska Guarantee Association only
includes insurance companies. These companies have the resources
to make good on claims. She explained that if one company becomes
insolvent, all the remaining companies make good on the policies.
All insurers must provide this safety net in Alaska.
Representative Martin asked if a worker can sue for false coverage.
Ms. Burke noted that the State requires statutory minimum coverage.
If an insurance company sold a worker something below the statutory
minimum they could be subject to litigation. The legislation
exempts the group from insurance laws that are not specifically
addressed in the legislation. She did not know if the State could
be sued. The Division of Insurance is responsible for the
financial aspect of the legislation. The Division of Workers'
Compensation is responsible for enforcing the laws in regards to
claims. All workers must be covered. In the case of bankruptcy,
injured workers would be included with other claimants.
Representative Davies referred to page 11, lines 20 - 22. Ms.
Burke explained that the group will be assessed before liquidation.
She noted that Title 21 provides that the Division take action if
there is a danger of a crisis. The legislation requires financial
statements to be filed, but does not give the Division similar
authority to act.
MITCHELL GRAVO, ALASKA STATE HOME BUILDERS ASSOCIATION testified in
support of HB 116. He noted that North Carolina was the first
state to institute a similar program in the 1980's. Since then, 13
other states have created pooling arrangements. The legislation is
based on North Carolina's statute. He pointed out that the program
has been successful in other states. He maintained that workers'
compensation costs have been reduced by 20 to 40 percent. He
stressed that the legislation allows groups of small businesses to
reduce the huge burden of the cost of workers' compensation. He
compared the New Mexico program to the proposal. Mr. Gravo
indicated that the Association has 800 members.
(Tape Change, HFC 97-123, Side 1)
ALAN WILSON, LEGISLATIVE CHAIR, ALASKA STATE HOME BUILDERS
ASSOCIATION, JUNEAU stressed that the population of New Mexico is
similar to that of Alaska. He observed that the New Mexico program
is successful. He emphasized that safety will help reduce claims.
He stated that small businesses seldom see safety inspectors.
Co-Chair Therriault questioned how Mr. Wilson viewed the risk of
personal bankruptcy. Mr. Wilson emphasized that they will be
protected by reinsurance. He acknowledged that excess insurance is
expensive. He stressed that surpluses will be used to pay claims
in the succeeding years, reducing the need for reinsurance. He
emphasized that the group will be comprised of small, independent,
custom home remodelers and builders.
Mr. Gravo stressed that the Association believes that the benefit
far outweighs the risk. Mr. Wilson emphasized that, in good years,
profits will remain within the group.
PAUL GROSSI, DIRECTOR, DIVISION OF WORKERS' COMPENSATION,
DEPARTMENT OF LABOR noted that the Department supports the concept
of the legislation. He noted that the legislation could reduce
risk and increase safety. He expressed concern that there is not
adequate funding to assure that claims will be paid. He
acknowledged that the group could be successful if there are no
catastrophic claims. He pointed out that the $1 million dollars in
assets exist outside the group. He stressed that the first injury
could be extensive. He noted that a ten member group could be ten
employees. He maintained that other programs that have been
successful have a large pool with hundreds of employees. He
reiterated concerns regarding the ability to pay claims. He
observed that he reviewed workers' compensation cases for 125
members in the Alaska Home Builders Association. The average
yearly claim cost for these businesses, during the last five years,
was just under $1 million dollars. He suggested the bond be
determined by the director.
Mr. Grossi discussed self insurers. He observed self insurers are
individual employers that pay their liability and are required to
have $5 million dollars in assets and excess insurance. He
stressed that self insurance is costly. He urged the Committee to
error on the conservative side.
HB 116 was HELD in Committee for further consideration.
ADJOURNMENT
The meeting adjourned at 5:31 p.m.
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